01st January, 2016 (MAINS)


Q1. In the view of the declining average size of land holdings in India which has made agriculture non – viable for a majority of farmers should contract farming and land leasing be promoted in agriculture? Critically evaluate the pros and cons. [12.5marks/2015/GS-3] 200 words.

Please write answer in the comments section.

  • Ashi Agarwal

    2015 mains GS3 question solved:
    Q1. In the view of the declining average size of land holdings in India which has made agriculture non – viable for a majority of farmers should contract farming and land leasing be promoted in agriculture? Critically evaluate the pros and cons.
    Answer: Contract farming: It involves agricultural production being carried out on the basis of an agreement between the buyer and farm producers.

    Contract farming – Pros:
    1. It can offer the farmers both an assured market and access to production support.
    2. It is also of interest to buyers, who seek supplies of products for sale further along the value chain or for processing. Processors constitute the main users of contracts, as the guaranteed supply enables them to maximise utilization of their processing capacity.
    3. Contracts with farmers can also reduce risk from disease or weather and facilitate certification, which is being increasingly demanded by advanced markets.
    4. There are also potential benefits for national economies as contract farming leads to economies of scale.

    Contract farming – Cons:
    1. Farmers may sell to a buyer other than the one with whom they hold a contract (known as side selling), or using inputs supplied by the company for purposes other than intended.
    2. From the other side, a company sometimes fails to buy products at the agreed prices or in the agreed quantities, or arbitrarily downgrades produce quality.
    3. A system of law is essential to assist farmers and their buyers in the negotiation and drafting of contracts. It is also important to protect them from risks that may occur during contractual execution, such as abuse of power by the stronger bargaining party or breach of contract.
    4. Even successful contracts from a legal point of view can face other difficulties. For example, family relationships can be threatened. Work for contracts is often done by women but the contracts are invariably in the name of the man who also receives the payment.
    5. Contracts can break down because of poor management by the company or as a result of unrealistic expectations about the capacity of farmers or about the yields that can be achieved.

    Land Leasing: It is a contractual agreement by which a landowner transfers to a tenant the right to use and possess land and/or other real or personal property for a limited period of time. In exchange for these rights, the tenant agrees to pay the landowner rent in the form of either a cash payment, a share of the crops produced, or the income from livestock sold.

    Land leasing pros:
    1. Lower Capital Investment as the capital investment is shared between landlord and tenant.
    2. It increases financial efficiency as when funds are limited, it is often more profitable to spend this money on seed, fertilizer, chemicals and machinery than on buying land.
    3. Leasing enables the beginning farmer to gain needed experience in the financial operation of a farm business before committing to a long-term investment in land.
    4. By renting, both the landlord and the tenant can share in the risks and profits of farming. This is particularly important to a farmer with limited capital.
    5. A retiring farmer might consider leasing all or a portion of his or her land base rather than selling.

    Land leasing cons:
    1. Short-term leases create lack of security of tenure for the tenant.
    2. Short-term leases provide more flexibility for landlords since it is possible to change tenants quickly or to sell the land. However, short-term leases can work to the detriment of the landlord since it may not encourage sustainable farming practices by the tenant resulting in lack of efficiency, conservation and incentive to make improvements.
    3. As with any business venture involving two or more persons, disputes and disagreements can arise.
    4. Lack of Bargaining Power and Managerial Control for the tenant as there may be situations where the landlord has greater bargaining power even though the tenant is a capable manager. The landlord may insist on making most of the management decisions even though his/her contributions to the lease may be substantially less than the tenant’s. For example, the landlord may insist on certain crops being grown that the tenant feels are not the most profitable.

    • http://shashidthakur23.blog.com Shashi Thakur

      please try to maintain word limit. it will be for your own good. if u cannot maintain word limit here it will be difficult in the examination hall…

      • Ashi Agarwal

        will come with time..